Commercial General Liability (CGL) & Commercial Lines
Key Takeaways
- The CGL has three insuring agreements: Coverage A (bodily injury and property damage), Coverage B (personal and advertising injury - libel, slander, false arrest, invasion of privacy), and Coverage C (medical payments, paid regardless of fault).
- An occurrence form covers injury that happens during the policy period no matter when the claim is filed; a claims-made form covers claims first made during the policy period, subject to a retroactive date.
- The retroactive date on a claims-made policy bars coverage for injury that occurred before it; an Extended Reporting Period (tail) preserves coverage for claims made after the policy ends.
- CGL limits include a per-occurrence limit and an aggregate limit (the most paid for all covered losses during the policy period); the general aggregate can be exhausted before any single occurrence limit.
- Businesses combine coverages in a Commercial Package Policy (CPP) or, for small/medium firms, a Businessowners Policy (BOP) that bundles property and liability; commercial auto uses numeric symbols to designate covered autos.
The Three CGL Coverages
The Commercial General Liability (CGL) policy is the standard form insuring a business against liability to third parties. It contains three separate insuring agreements, each with its own limit.
- Coverage A - Bodily Injury and Property Damage Liability. Pays sums the insured is legally obligated to pay for BI or PD caused by an occurrence and arising from the business's premises, operations, products, or completed work.
- Coverage B - Personal and Advertising Injury Liability. Pays for non-physical offenses: libel, slander, false arrest, malicious prosecution, wrongful eviction, invasion of privacy, and infringing on copyright/slogan in advertising.
- Coverage C - Medical Payments. Pays reasonable medical expenses for a third party injured on the insured's premises or by its operations, regardless of fault and without a lawsuit - a goodwill coverage that can head off bigger claims.
Coverage A and B both require the insured to be legally liable; Coverage C does not. Memorize which offenses live in Coverage B - libel and slander are favorite distractors.
Coverage A is further split by the exam into premises and operations (slip-and-falls and ongoing work) and products-completed operations (harm from a product sold or a job already finished). These two share Coverage A's wording but have separate aggregate limits, which is why a manufacturer with a heavy product exposure watches the products-completed operations aggregate closely. The CGL is a liability form only - it does not pay to repair the insured's own defective product or work.
Occurrence vs Claims-Made: The Trigger
The biggest CGL exam topic is when coverage is triggered. There are two trigger types.
- Occurrence form - covers BI or PD that happens during the policy period, regardless of when the claim is reported. A claim filed years later is still covered if the injury occurred while the policy was in force. This suits exposures where harm shows up long after the act (a slip-and-fall reported promptly is simple; latent product harm is not).
- Claims-made form - covers claims first made (filed) during the policy period, regardless of when the injury occurred - but only back to the retroactive date.
Two features make claims-made work:
- Retroactive date - the earliest date an injury can have occurred and still be covered. Injury before the retro date is not covered, even if the claim is filed during the policy period.
- Extended Reporting Period (ERP) or "tail" - lets the insured report covered claims after the policy ends, preserving protection when switching insurers or retiring. A basic tail is automatic for a short window; a supplemental tail is purchased.
Claims-made policies typically move through annual steps: a first-year ("step 1") policy is cheapest because little prior exposure can mature into a claim, and the premium rises each year until it reaches a mature claims-made rate (around year five). Insurers favor claims-made for long-tail exposures - like pollution or medical injury that surface years later - because the carrier knows its exposure closes when the reporting period ends. The trade-off for the insured is the risk of a coverage gap when switching carriers, which the tail (ERP) is designed to prevent.
Per-Occurrence vs Aggregate Limits
CGL limits are layered, and confusing the two is a classic mistake.
| Limit | What It Caps |
|---|---|
| Each Occurrence Limit | The most paid for any single occurrence (Coverage A and C combined) |
| Personal & Advertising Injury Limit | The most paid per person/organization under Coverage B |
| Products-Completed Operations Aggregate | The most paid for ALL products/completed-work claims in the policy period |
| General Aggregate Limit | The most paid for ALL other covered losses in the policy period |
| Medical Expense (Coverage C) Limit | A sublimit per person |
The aggregate is the key word: it is the ceiling for the entire policy period, not per claim. If a business with a $1,000,000 each-occurrence / $2,000,000 general aggregate has three $800,000 occurrences, each is within the occurrence limit, but the third claim is reduced because the $2,000,000 aggregate is being exhausted ($800K + $800K leaves only $400K). When the aggregate is gone, the policy pays nothing more even if the per-occurrence limit appears available.
CPP, BOP, and Commercial Auto
Businesses rarely buy a CGL alone. They assemble coverage in two main ways.
- Commercial Package Policy (CPP). A modular policy combining two or more coverage parts - commonly Commercial Property and CGL - under one Common Declarations and Common Conditions. The insured picks the parts it needs (crime, inland marine, commercial auto, etc.), often earning a package discount.
- Businessowners Policy (BOP). A pre-packaged policy for small to medium-sized businesses (offices, retail, apartments) that bundles property and liability into one simplified contract. It is less customizable than a CPP but easier and cheaper for eligible risks.
Commercial Auto uses numeric symbols on the declarations to define which vehicles are covered. For example, Symbol 1 = "any auto" (the broadest liability designation), Symbol 7 = specifically described autos, Symbol 8 = hired autos, and Symbol 9 = non-owned autos. The symbol shown next to each coverage tells you exactly which autos that coverage applies to.
Larger firms then layer protection: the CGL or commercial auto is the primary (underlying) policy, and a commercial umbrella sits above it for catastrophic claims - the subject of the next section.
A contractor's claims-made CGL has a retroactive date of January 1, 2024. In March 2026 a homeowner files suit over faulty work the contractor performed in November 2023. Is the claim covered?
A competitor sues a company for slander after the company's sales rep publicly made false statements damaging the competitor's reputation. Which CGL coverage responds?
A CGL has a $1,000,000 each-occurrence limit and a $2,000,000 general aggregate. The business has already paid out $1,800,000 in covered claims this policy period. A new covered occurrence results in a $700,000 judgment. How much will the CGL pay?
A small accounting office wants one simplified policy bundling its building, contents, and general liability without assembling separate coverage parts. Which form best fits?